Defence contractor BAE has reported a seven per cent drop in annual revenue to £17.8 million.

The group blamed the drop in sales on US budget cuts and delays in agreeing a final contract price with Saudi Arabia to supply 72 Typhoon aircraft.

BAE, which employs around 4,000 people in Scotland, including more than 3,000 at the Govan and Scotstoun ship yards on the Clyde, said profits were down 6.6 per cent year on year to £1.37 billion.

However BAE said it expects a return to earnings per share growth this year, subject to US budgets being finalised and terms being agreed on a key fighter jet contract with Saudi Arabia.

Shares in BAE rose more than four per cent in early trading today after the group announced it was increasing its final dividend by four per cent to 19.5 pence.

BAE, which derives around 20 per cent of its revenues from the US market, said further public spending cuts in the US and the UK will continue to put pressure on sales.

However, the group said contract value secured last year outwith the US and UK markets more than doubled to £11.2 billion and an eight per cent rise in the value of its order backlog to £42 billion.

BAE, which is focusing its efforts in cyber, intelligence and security businesses after a drop off in work linked to US operations in Iraq and Afghanistan, cut a further 3,600 staff worldwide last year, taking total headcount reductions to around 26,000 in the past four years.

The group has also been under pressure from shareholders to develop alternative growth strategies following its failure to seal a merger with Franco-German defence giant EADS last year.

The company's order book was given a lift recently with Oman's order of 12 Typhoon and eight Hawk trainer jets in a deal worth around £2.5 billion including support packages.

Delivery of both aircraft is expected to begin in 2017.

BAE was forced to scrap its tie-up with Airbus firm EADS after political wrangling scuppered the two companies' plans to create the world's biggest defence and aerospace group, with combined sales of around £60 billion.